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Coffee and music:

Coffee and music create a potent mix at Starbucks: Tuesday, July 19, 2005 By Steven Gray and Ethan Smith, The Wall Street Journal: When Concord Records Inc. President Glen Barros was deciding whether to sign an Italian pop singer named Zucchero to a U.S. record deal this spring, his deliberations included an unusual consideration: Would Starbucks Corp. help finance and distribute the singer's next CD? More than once, Mr. Barros says, he has consulted Starbucks executives when pondering a musical act -- effectively giving them final say on whether to sign an artist. "If they'll be our partner," he says, "we'll do it."

Starbucks, already the world's largest chain of coffee shops, has emerged as an improbably potent force in the music business, able to resurrect moribund careers, enrage music retailers, and now -- the company hopes -- create new stars.... Starbucks has found success selling carefully selected music to its millions of loyal customers.... Mr. Barros knows how powerful a boost from the coffee chain can be. Last summer, his independent jazz label joined with Starbucks to produce and distribute "Genius Loves Company," a collection of duets between the late Ray Charles and performers such as Norah Jones. Helped by the biographical film, "Ray," and attention about his death, the record sold nearly three million copies -- about a quarter at Starbucks stores -- and in February won eight Grammys. No new Ray Charles release in decades had come close to that sales level.

That performance grabbed the attention of a music industry that has seen sales sink by 13 percent since 2000. Almost overnight, fierce competition emerged to supply one of a handful of CDs sold at any given time at Starbucks. The latest albums by Coldplay and Carole King are now in Starbucks. Two discs by Bob Dylan are due in stores next month. Most of the CDs Starbucks sells hit its shops at the same time that they reach traditional music outlets. The chain also offers some exclusives.... The push into music is part of Starbucks Chairman Howard Schultz's broader ambitions to make its stores the "third place" in consumers' lives, after home and the office. As Mr. Schultz, 51 years old, sees it, music and other forms of entertainment help draw customers and, in turn, drive up sales of Starbucks's pricey coffee and food. Starbucks offers high-speed Internet access at some stores. Last year, the company also opened a sprawling combination coffeehouse and music store, called Hear Music Coffeehouse, in Santa Monica, Calif....

Music sold at Starbucks tends to appeal to the chain's mostly adult customers, and generally reflects a sensibility similar to that of National Public Radio stations like Los Angeles' influential KCRW: moderately eclectic, often jazzy, and never noisy enough to disrupt a quiet cup of coffee.... It isn't clear how much money, if any, Starbucks makes from music. The company declines to publicly disclose revenue from CD sales, but says it's growing steadily....

Choosing the music isn't easy, partly because Starbucks's customer base is ever-widening, reflecting an increasingly young, multiethnic, transclass mix. Five years ago, about 3 percent of Starbucks customers were between the ages of 18 and 24, 16 percent were people of color, 78 percent had college degrees, and overall they had an average annual income of $81,000. Today, however, about 13 percent of the company's customers are between 18 and 24, 37 percent are people of color, 56 percent are college graduates, and they earn on average $55,000 a year.

When Starbucks carries an album, its stores often account for 20 percent to 30 percent of the record's weekly sales, and sometimes as much as 50 percent, Starbucks and music executives say.... The highest sales percentages often are for CDs by relative unknowns who aren't selling many records overall. In some weeks, the chain was responsible for almost 50 percent of newcomer Amos Lee's total sales, but only 6 percent of the 1.5 million U.S. sales of Coldplay's new "X&Y."

In a sales environment in which retailers from Amazon to Target routinely discount CDs, Starbucks often charges customers close to and in some instances more than the full retail price...

Where is the synergy here? Is Starbucks acting as its customers' personal music shopper? Or is Starbucks creating an affinity between the smell of its coffee, the taste of sugar, and the music it plays that adds psychological weight to the music?